Target Corporation Analysis
Writing Mentor Meeting Held 2/12/15
Ryan Revia
Table of Contents
Balanced Scorecard
Page 1
Market Commonality vs. Resource Similarity
Page 4
SWOT Analysis
Page 7
Uniqueness Drivers
Page10
Conclusion
Page12
References
Page13
Balanced Scorecard Approach
Target’s Vision: "Our mission is to make Target the preferred shopping destination for
our guests by delivering outstanding value, continuous innovation, and an exceptional
guest experience by consistently fulfilling our Expect More. Pay Less. Brand promise."
“Our mission is to make Target the preferred shopping destination for our guests
by delivering outstanding value, continuous innovation, and an exceptional guest
experience by consistently fulfilling our Expect More. Pay Less. Brand promise.”
The four perspectives of the balanced scorecard show Target’s variety of strategic
initiatives and the actions taken to achieve them. Maintaining a large market share in the
retail industry for a number of years, Target looks to drive financial performance by
reaching $100 billion in sales and $8 per share profit by 2017. Financial statements show
that Target’s revenue has decreased 1% over the last year, while gaining 2.3% over the
last five years. In addition, earnings before interest and taxes (EBIT) have decreased
21.3% in the last year and 0.8% over the last five. Similarly, net earnings and diluted
earnings per share (diluted EPS) have decreased by 34.3% and 32.1% over the last year,
and losing 2.3% and 1.4% over the last five, respectively. While the financial indicators
are significantly low, Target looks to rebound with improved performance in Canada and
through investment in their current product lines and Omni-channel presence.
From the customer perspective, Target looks to increase market share through
development in current product lines. One of the 2015 initiatives is to increase their
sustainable seafood selection to 100%, of which 45% of the current inventory has
fulfilled. In 2016, Target looks to improve its owned-brand packaging. Of the 50 brands,
32 have undergone changes to reflect improvements in weight, such as the Archer Farms
nuts and trail mixes, and environmental impact. Target also looks to increase its organic
offering 25% by 2017 (currently up 13%). Target plans to make additional improvements
in the learning and growth perspective over the next year.
Target will reinforce their mantra of “A legacy of giving and service” through a
number of team and company goals. For example, Target planned to reach 700,000
employee volunteer hours by 2015. Target employees actually reached more than a
million hours over the last year, a statistic they now look to maintain. In addition, Target
plans to increase employee use of financial tools, like their 401K, by 30% in 2015.
Currently, only 18% of employees are enrolled. Target also looks to increase health
assessments of those offered in their plan to 80%, an increase from 45% today. Biometric
screening of employees on the company-sponsored health plan also looks to rise, at 60%
of the desired 80% in 2015. Other employee healthcare initiatives include screenings for
breast cancer, colon cancer, cervical cancer, diabetes (HbA1C), and educational support
or giving.
Efficiency is also a focus for improvement in the next year, with transportation
costs and environmental impact leading the way. In 2015 Target looks to improve
inbound transportation by 15% Cartons/Mile (C/M) and outbound transportation by 20%
C/M. Inbound transportation has improved by 16% C/M and outbound transportation has
improved by 22% C/M. Target also plans to achieve ENERGY STAR certifications for
75% of it’s U.S. buildings, of which 45% currently have. Target will also continue their
reduction of greenhouse gas emissions in two measures: per square foot and per million
dollars. Currently, emissions have been reduced by 7.1% per square foot of the desired
10% and 7.4% per million dollars of the 20% desired, respectively. Water use will also be
monitored, now with a 4.8% per square foot decrease of the desired 10%.
Market Commonality vs. Resource Similarity for Target Corporation
•High
Wal-Mart Stores Inc.
Amazon.com Inc.
Kohl's Corporation
Market
Commonality
Big Lots Inc.
Sears Holdings
Corporation
Costco
Wholesale
Corporation
Fred's Inc.
•Low
•Low
•High
Resource Similarity
The previous chart compares several firms in the discount retail industry and the
extent to which those firms share market commonality and resource similarity with
Target Corporation. Market commonality indicates a similar customer base between two
companies, while resource similarity indicates that the products, or range of products,
offered by two firms are alike. Seven other major discount retailers were used as a basis
for analysis of the Target Corporation’s external environment.
As Wal-Mart is Target’s largest retail competitor, it was a natural fit for the
market commonality and resource similarity analysis. Wal-Mart has the most
commonality with Target in terms of both resource and market similarity, thus it is the
most direct competitor of Target. In other words, the actions of Wal-Mart have the most
impact on Target’s customer base and ability to generate sufficient revenue. While they
are the most similar, Wal-Mart actually offers a larger range of products, has a greater
geographic dispersion, and does so through a broad low-cost strategy. Because of this,
Target has to avoid losing customers on the basis of price by continued differentiation of
products and services that generate value greater than the cost savings associated with
switching.
Both Sears Holding Corporation and Costco Wholesale Corporation have high
resource similarity to Target, however, Costco has less market commonality because it is
a wholesale distributor, whereas Sears and Target are not. Furthermore, Target shares
high market commonality with Amazon.com because of their immense popularity and
customer base. Amazon.com has a lower resource similarity to Target because of the
immense range of products of they offer, far exceeding that of Target. Kohl’s
Corporation is moderately similar in terms of market commonality; however, it lacks the
product range and overall scope needed to indicate resource similarity. Big Lots had the
lowest levels of market commonality and resource similarity for a number of reasons.
While both Target and Big Lots are discount retailers, Big Lots is generally perceived as
a low-cost provider. In other words, while Target’s customers may not mind paying a
premium for better service and cleaner stores, many customers of Big Lots shop on the
basis of price alone. In addition to the low market commonality, Target carries a broader
range of products and services like pharmacies, grocery sections, and electronics. By
understanding the market commonality and resource similarity between firms of the same
industry, one can indicate where true rivalry exists and thus, where external risk is
coming from.
SWOT Analysis of Target
Strengths
Weaknesses
-Quality of service and customer’s in-store experience
-Less locations than Wal-Mart, their closest competitor
-Cleanliness of the stores
-Exists solely in the U.S.
-Loyalty programs like Cartwheel
-Higher perception of pricing than other discount retailers
-Target credit card, Target Visa credit card, and Target
-Reliance on the value of differentiating guest experience
REDcard
-Expansion into Canada
-Strong owned-brand presence
-Price match policy
-Product range
Opportunities
Threats
-Continued enhancement of its grocery department,
-Increasingly competitive retail segment
especially in organic foods and sustainable seafood
-Reliance on a recovering U.S. economy
-Further development of online retail capabilities
-Increased development of multichannel retailing by
-Increased push of owned-brand products
competitors
-Lead the industry in conducting environmentally friendly
-Loss of consumer confidence in online retail activities
business practices
following the 2013 data breach
The SWOT analysis is used to evaluate a company’s resources, capabilities, and
competitiveness by separating the internal and external factors by whether or not they
could help or hurt the firm. The four distinct categories that result are the internal
strengths and weaknesses, and the external opportunities and threats. Internally, Target
Corporation maintains a very strong brand that has resulted in the strengthening of other
owned-brands and a loyal customer base. In addition, the overall guest experience,
cleanliness of the store, loyalty programs, and internal financing options (like the Target
credit card) are critical strengths that have helped differentiate Target as a company.
On the contrary, some of the weaknesses that will need to be monitored include
the lower geographic dispersion of stores as compared to Wal-Mart (their closest
competitor) and the lack of Target’s international presence. When Target announced in
January that it would be closing Canadian operations, it ended its journey into
international expansion. Some other relevant weaknesses were the perception of Target as
a more expensive store and their reliance on guest experience to be valuable enough to
offset the higher cost.
Target has a number of opportunities to grow the firm, as the development of the
grocery section mirrors a public shift toward healthier, and oftentimes organic, food
choices. By having the correct products in place to satisfy the changing market
conditions, Target can benefit from the larger profit margin of owned-brand products, in
addition to third-party suppliers. As the retail industry continues to move towards
multichannel and online dispersion, Target will have to continue to update its capabilities
beyond the current applications and loyalty programs so that they can merely maintain
market share and not be squeezed out by an internet giant like Amazon.com. Finally,
Target has the opportunity to lead the retail industry in a movement towards responsible,
eco-friendly business practices across all segments of the business.
From an external perspective, Target will be threatened by the increasingly
competitive discount retail industry, much of which is now moving towards multichannel
distribution because of the flexibility and lower costs associated with online customers.
Because of Target’s reported data breach in 2013, Target will have to work towards
repairing consumer confidence in Target’s online presence and assurance that they will
be able to protect customer’s financial information safe. The final external threat was
Target’s heavy reliance on a soft and unstable U.S. economy, which if consumer
preference changes, would remove Target’s customer base.
Analysis of Uniqueness Drivers for Target Corporation
Product Features and
Performance:
• Higher perceived quality
• Unique and distinctive
merchandise
Quality Control Processes:
• Waste, water, and
greenhouse gas emission
reduction initiatives
• Eco-friendly manufacturing
and packaging initiatives
Sales & Marketing:
• bullseye logo, brand
promise
• Higher perceived quality as
a discount retailer
Uniqueness
Drivers
Employee skill, training,
experience:
Customer Service:
• Differentiated guest
experience
• Friendly and personalized
service
• Cleanliness/store
appearance
Production and R&D
• Use of techniques that are
less environmentally
impactful
• Owned-brand product and
packaging development
• Investment in multichannel
retailing
Technology and
Innovation
• Friendly and helpful
employees support a
differentiated shopping
experience
• Guest experience
• Cartwheel
• Partnership with Facebook
and Pinterest
Input Quaity
• Higher perceived quality
than competitors
Since Target follows a differentiation strategy, an analysis of the uniqueness
drivers was completed to show the actions that differentiate Target from that of the
competition. For example, by using quality control processes to ensure less waste and
minimum ecological impact during manufacturing, Target can set the example for the
discount retail industry and other firms as a whole. Minimizing waste will also result in
the cost savings generated from using the least amount of inputs, while maximizing the
quality of those inputs to ensure that the extra cost of Target’s products are accurately
adjusted for the additional perceived quality. Target also benefits heavily from their
unique brand image. While the bull’s-eye is a very noticeable symbol in the United
States, the perception that it and its products are of a greater level of quality is much more
valuable.
Target’s most important uniqueness driver is their customer service and overall
guest experience. By creating a clean, enjoyable, and personalized experience for each
shopper, Target creates more value to the customer than the money that might be saved at
another retailer. In order to sustain this advantage, Target will have to continue to invest
in their employees and employee development programs.
Conclusion
After analyzing Target Corporation through the balanced scorecard, market
commonality and resource similarity comparison, SWOT, and a review of the company’s
uniqueness drivers, it is apparent that the differentiation strategy employed by Target has
contributed heavily to the company’s placement as one of the discount retail market
leaders. Target has effectively differentiated itself through investment in guest experience
and service, meaning customers value their time in Target more than any other discount
retailer. Because of that, people are willing to, all other things being equal; pay more for
an item because of the subsequent Target experience than they would for the same item at
a different store.
By continuing to develop multichannel distribution techniques and Target’s
online presence, the company can continue to grow its revenue base through browser or
application based sales. In addition, the move towards online sales can potentially help
Target attain some of the market share that online marketplaces like Amazon.com
currently control.
This will become increasingly important as Target looks to recover from their
failed expansion into Canada, leaving a loss of about $5.4 billion after closing each of the
124 stores opened just two years ago. With consumer trends long indicating movement
towards Internet and application-based shopping, Target will either move with the trend
and reap the benefits of online shopping, or they will suffer in a digital age where some
people now solely shop online.
References
Leinbach-Reyhle, Nicole. (2014, August 8). How Target stands out among its discount
store competitors. Forbes Magazine. Retrieved from
http://www.forbes.com/sites/nicoleleinbachreyhle/2014/08/28/target-shopping/
Wahba, Phil. (2015, January 15). Why Target failed in Canada. Fortune Magazine.
Retrieved from http://fortune.com/2015/01/15/target-canada-fail/
Target Corporation. (2014, June). Target 2013 Corporate Responsibility Report.
Retrieved from https://corporate.target.com/_media/TargetCorp/csr/pdf/2013corporate-responsibility-report.pdf
Target Corporation. (2014, March 14). Target 2013 Annual Report. Retrieved from
https://corporate.target.com/annual-reports/pdf-viewer2013?cover=6725&parts=6724-6726-6727-6730-6728
Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A.J. (2014). Crafting
and Executing Strategy: The Quest for Competitive Advantage (19th ed.).
McGraw Hill Education.